The formula
The first ATR value is usually a plain average of the first 14 true ranges. Some platforms use a simple or exponential average instead of Wilder's, so values can differ a little between charts.
A worked example
GBP/USD closes at 1.2700. The next day's high is 1.2765 and low 1.2690:
Now a gap day: previous close 1.2700, high 1.2810, low 1.2760. The bar's range is only 50 pips, but the true range is |1.2810 − 1.2700| = 110 pips, because the gap was real movement you would have lived through.
A 123 pip stop needs a smaller position than a 40 pip one for the same dollar risk. ATR sets the distance, position sizing keeps the risk constant.
Common mistakes
- Reading ATR as direction. Rising ATR means bigger moves, up or down.
- Mixing timeframes. A daily ATR stop on a 5-minute entry is far too wide for the setup.
- Not resizing when ATR expands. Same lots with a wider stop is more risk, not the same risk.
How the RB journal tracks it
The journal's volatility panel shows the 14-day ATR and average daily range per pair, so you can sanity-check a stop or target before the trade. In the backtester, a strategy's stop can be set as a multiple of ATR(14).
See your own Average True Range from real trades
Log trades by hand, import a file, or live-sync MT4, MT5 and cTrader through the RBSync EA. The numbers on this page then come from your own history instead of examples.
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